As Google, Microsoft Face Off, Small Cloud Companies Get Hurt

Google's announcement of the start of Google Drive for Work at I/O may lower pricing while heightening competition for cloud computing.

NEW YORK (The Street) -- As Google (GOOG) wants more companies in its cloud, it's going to hurt companies that do not have varied offerings and rely solely on attracting new customers for added revenue.

The entry of one of technology's biggest companies into the competition for corporate cloud computing, with its Google Drive for Work program, makes an already crowded space far more cramped, and competitive. According to Ahmet Tuncay, CEO of the cloud-computing provider Soonr, the announcement is going to have a dramatic impact on the cloud computing market.

"They probably have one of the best infrastructures for offering cloud services," Tuncay said in a June 27 phone interview.

With the announcement of Google Drive for Work, Google is bundling various offerings from Google Docs to Android and Chrome with Drive storage and offering it at a price likely to undercut competitors.

"The low price offering is what will be most painful for competitors," Tuncay noted. "They have taken the various pieces and have shrink-wrapped the bundle. They've said, 'you can buy as much as you want. It's all you can eat -- $10 a month for unlimited storage.'"

Designed with collaboration in mind, Google's seamless additions include Native Office Editing (which allows users to edit Microsoft Word documents) within the suite of editors of Google Drive. The company will also add Google Slides, software that will allow users to create presentations from mobile devices, to the Drive's editing suite.

Google Senior Vice President for Chrome and Apps at Google Sundar Pichai announced the firm's initiative to combine all of the elements "seamlessly" for users. One of those key tools added to help the initiative is Android for Work. This Android feature, designed to help divide professional and personal communication, allows users to maintain two separate identities on Android devices. "As we bring Android for Work one of the important use cases we care about is productivity, documents collaboration, which is why we have invested so much in Google Docs and the whole suit of editors," Pichai said during the conference.

The move will keep adding pressure to Microsoft (MSFT) (via its OneDrive platform) and other companies vying for contracts from companies eager to safely store their data and information. Since launching two years ago, Google Drive now has 190 million 30-day users working in its cloud for both personal and professional projects.

Microsoft has proved to be a top competitor in the cloud space, with commercial cloud revenue doubling in the fiscal third quarter according to an April earnings call. Despite first quarter revenue, Tuncay projected Redmond, Wash.-based Microsoft will feel a hit after Google's announcement. "I think the pressure is going to be on Microsoft, because Google can drive with zero and still make money and Microsoft can't, Tuncay said during the interview. "Microsoft is going to continue to charge the kinds of dollars that they are charging today."

Microsoft may follow Google's plan in the near future, according to Tuncay, since the company has an advantage when it comes to the corporate world. "Microsoft will start to shrink wrap their sets of apps too. Google has Google Docs but what businesses want is Office 365 because that is what they're used to using."